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OSCPA testifies on BID and guaranteed payments

Written on May 5, 2023

OSCPA continued its advocacy for members at the Ohio Statehouse by offering proponent testimony Tuesday on House Bill 138, a bill that classifies certain pass-through entity payments as business income. 

“The issue that this legislation addresses arose because of Ohio Department of Taxation (“ODT”) audit policy,” said Tom Zaino, CPA, managing member of Zaino Hall & Farrin in his proponent testimony. “The term ‘guaranteed payments’ is not a defined term in the Ohio Revised Code. Therefore, ODT should generally defer to the federal definition of guaranteed payments. Guaranteed payments are payments made by a partnership to a partner for services or the use of capital so long as the payment is determined without regard to the income of the partnership.” 

H.B. 138 was introduced in March and its sponsors are State Rep. Angie King (R-Celina) and State Rep. Tom Young (R-Washington Twp.).  It would classify guaranteed payments paid to pass-through entity (PTE) investors, regardless of their ownership interest, as “business income” and therefore eligible for the business income deduction and flat income tax rate.  

“Similar to H.B. 515 (134th GA), which dealt with the sale of a business and the BID, H.B. 138 is a remedial measure intended to clarify existing law and apply to any income that is subject to an ODT audit or appeal on or after the effective date,” Zaino said. “The goal is to clarify the law so it can be applied to currently pending audits or appeals.”  

The OSCPA has been making its presence known at the Ohio Statehouse this spring, testifying in front of the Ohio House Ways & Means Committee on priority tax issues and bonus depreciation.  

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